Will Megabus kill High Speed Rail?

The slightly longer answer is that while new, innovative bus services on some routes in the United States are winning new customers to long distance buses, they will pose little threat once there are true high speed railway services to compete with. They will probably be price competitive, but speed and service quality of the kind now enjoyed in France, Germany, Japan – and even across the English Channel will secure a much larger chunk of what is now airline travel.

I was a bit taken aback by the tone of the Economist article until I realised that it was not a newspaper article in the Economist’s usual style but a blog post where “our correspondents inform and entertain business travellers with news, views and reviews that help them make the most of life on the road” . So not much analysis or data. Indeed there is not a great deal more in the Business Week article that inspired the blog post.

What is significant is the history of MegaBus and why they are so successful. “Megabus and Coach USA are owned by the British company Stagecoach Group, and they have fundamentally changed the way Americans—especially the young—travel.”

Much of the recent success of the curbside business derives from its nimbleness. … the bus simply uses existing roads, requiring no policy debates, government funding, or land management studies. It needs only a curb and a sign. Bus companies are also able to gauge demand quickly, gather rider input online, then alter pickup locations or routes just by posting changes to their websites. … numerous requests on transit blogs for new service from Chicago to Memphis … A couple of weeks later he has the buses up and running.

While Business Week compares that the uphill struggle that Obama is having trying to get his high speed rail legislation through Congress, I do not agree that this poses much of a threat to high speed rail – though it does make for snappy copy. And the advantages of high speed rail have been discussed on this blogoften enough .

Bolt Bus in New York - my photo

So the thing that I really want to comment on is why we don’t see services like Bolt Bus and Megabus here. And the answer is the Passenger Transport Board. This really is a bit of an anachronism and it surprises me a little that it has survived the long run of the BC Liberals – especially with archconservative Kevin Falcon as Minister of Transport and of deregulation during that time. The PTB is the successor to the Motor Carrier Commission who I have also looked at a while ago. Then I was on about taxis but so far as I can see I have not said much about the inter city bus business.

No-one can operate an intercity bus in BC without a licence from the PTB, and they have to determine the fares and the schedules. In fact the process is lengthy and clumsy leading to complaints but no changes. And the key to the results the process produces is in a section of the Passenger Transport Act

28 (1) The board may approve an application forwarded to it under section 26 (1) if the board considers that

(a) there is a public need for the service the applicant proposes to provide under any special authorization,
(b) the applicant is a fit and proper person to provide that service and is capable of providing that service, and
(c) the application, if granted, would promote sound economic conditions in the passenger transportation business in British Columbia.

I have underlined what I see as the key phrase. What that means is the PTB continues the philosophy of the MCC – its purpose is to protect the established operators. There is no taxpayer subsidy for long distance buses as there is with transit. But there are equivalent challenges: basically the hope is that companies will cross subsidize low ridership routes to remote communities with the profits from better patronised services. Of course, those are the ones that attract other operators, who if allowed to “cream” the best business, will lower the profitability of the established operators and lead to cuts in service on the low profit routes.

Actually it does not seem to be working like this either, since there is no way the Board can compel an operator to continue to provide an unprofitable service as the Island case I cited above shows.

So given that we have a very poor level of intercity bus service in BC and many communities that would like better service, why has this regulator survived? I think apart from inertia, there must also be an understanding of the political power of those who currently hold licences. This is most obvious in the taxi business. Presumably, no-one important enough has ever wanted to get into our intercity bus market. It is simply not big enough to attract Stagecoach and the like. There have been innovators – the specialized services aimed at skiers to Whistler and surfers to Tofino testify to that. But we have yet to see anything significant to develop elsewhere. Yet I would bet that the same conditions that make for a good market in the US – high gas prices, rising air fares, slow lines at airport security checks – apply here.

Tofino Bus at Tofino - my photo

The key to MegaBus success has been its ability to adapt fares and schedules to demand. That is simply not possible here under PTB rules. If you believe the rhetoric of the market driven BC Liberals, then getting rid of the regulations – at least as far as services and prices are concerned (clearly safety must remain a paramount concern) would see all kinds of people who understand their local market getting into the intercity transportation business. And to the extent that cuts into the current need for many people to continue to own a car in case they need to make such a trip, that would actually be good for the environment. A well loaded bus is a pretty good way of reducing emissions per passenger kilometre travelled.

PCL bus at the Tsawassen Ferry terminal - my photo

There has actually been a steady increase in competition on some important routes like Vancouver – Victoria. The PCL bus still is first on, first off the ferry, but more people now use transit at each end – and walk on and off the ferry. The Quick shuttle bus to Seattle now offers wifi – and, as the CBC recently noted, there are still lower costs flying from SeaTac than YVR. The Amtrak train service is also often a bus – you have to read that schedule carefully – and even when it is a train, it is very slow. We have to hope that the proposal for high speed rail on this route survives better than the one in Florida.

Meanwhile, I would like to suggest that if we must keep regulation in place for intercity bus services, we do so in the public interest and not solely in the interests of the licensees.

11 Responses

I think to a certain extent the de facto deregulation of the bus business in BC led to a marked decrease in bus service in BC. Greyhound was allowed to abandon two-thirds of its stops and some small bus companies in the north vanished when courier licenses were issued with gay abandon. The intercity bus business is really a courier business in BC and the passengers a necessary evil to maintain the courier license. With no courier revenue, profit margins for BC intercity bus companies go out the window.

I see one particularly hideous peril if anyone is allowed to run a bus anywhere in BC and that is Chinese bus companies. On the New York – Boston corridor Chinese bus operators have taken advantage of a lax regulatory structure to offer heavily discounted intercity bus service. The prices are predicated on poor bus maintenance, low paid bus drivers and a complete disregard for safety. The resulting carnage is very unappealing if you ask me. So is the direct involvement of Chinese organized crime in those bus companies.

The capital costs for even a small bus company are quite stupendous. Highway coaches are $250,000 and up each and you need at least a few of them, along with real estate to park them on and a shop to maintain them in. To get basic economies of scale you should have at least 20 buses. So it’s not a business for the under-capitalized newbie.

There are a couple of existing bus BC companies that may be capable of such a venture if the circumstances were right. And I do mean a couple. There are a plethora of poorly-managed and disreputable bus companies in BC. The new owners of Greyhound may be interested but unfortunately they are mired in the jalopy rolling stock of the previous owners of Greyhound. The lemony buses are literally held together with duct tape and they are trying to make ends meet by using the buses as highway tractors to pull trailers full of freight.

One of the biggest problems of operating a bus business out of Vancouver is the cost of commercial real estate. It’s prohibitive really. The solution to that problem would be for a government authority to provide no-cost use of public land for intercity bus operators (the same way that it does for public transit in Vancouver). For instance, there is plenty of space for a bus-port at the Vancouver airport. Bus parking lots, administrative offices and maintenance buildings could be installed on existing parking space at YVR and leased out to private intercity bus companies at low or no cost.

I do not suggest for a moment that we abandon safety regulation. Indeed, recent experience in Vancouver with the taxi industry and its use of rebuilt cars shows how lax our present system of passenger vehicle regulation has become.

It is also interesting to me that you think that only existing BC companies should be considered. Clearly, we have fallen behind. Other places have better bus service and one reason for that is our regulatory system. Our geography is probably also a deterrent – but until the PTB is reformed we will never know.

I am not suggesting that only BC bus companies should be considered, although there may be BC bus companies that are capable. Greyhound is not a BC bus company. It is now owned by FirstGroup of Aberdeen, Scotland and it also operates the BoltBus in the photo in your blog entry.

Indeed the intercity bus service in BC has fallen way behind and it should be improved. Many areas of BC are no longer accessible by bus and the bus service BC has tends to be exceedingly slow and tedious with the added bonus of having buses that are sardine cans compared to what’s now available.

I think safety should be the number one consideration in the bus business in British Columbia. BC has had some of the most notoriously unsafe charter bus companies in Canada and the provincial regulator was slow to remove their operating permits. The last thing I want to see is more people killed by shabby bus operators in BC.

I suspect that these types of buses and high-speed rail are actually mostly complimentary and will work together to prove people with realistic options to driving. They could actually be feeders from smaller communities to high-speed rail.

By the way Stephen, that’s a great photo of the BoltBus! I thought it was a professional stock photo. You make the X3-45 look so stylish for such a utilitarian Prevost and for once a bus driver is not driving in the bike lane!

In the past couple of years long distance bus travel has become very popular in JAPAN!!..
Originally the only advantage of these buses was the price—half the price of a high speed train from Tokyo to Osaka—but one really HAD to need to save money, both because of the length of the trip (an all niter)and the lack of comfort (non reclining seats, loud PA before each stop etc.)

Since then several brash new companies have changed the whole concept. Some companies sell a limited number of tickets for 500 yen (about 6$ for Tokyo-Osaka vs a regular price of 90$) while others charge only 25% less than the Shinkansen (the later can’t never be beat for speed) but have women only buses or business class buses, with reclining seats, private TV etc. They also have both day and night service.

However most of these buses only serve the best routes (either for business or for sightseeing) and of course the size of the population in Japan ensure that both trains and buses have customers…The greater Tokyo has 36 millions people, the Greater Osaka 20 millions (the distance between them is about 500 km.) and there are several towns in between

It is not because the PTB is dysfunctional that some form of regulation is not in the public interest.

In Seoul, they were facing with similar problem, and deregulation has not been the route chosen…but a different regulation form.

You have eventually to travel in some poorly regulated third world countries to find why regulation giving you what you take for granted is good…

If regulation is bad, why keep it for transit, taxi…?..bring the jitney along Broadway!

…btw, Quebec regulation doesn’t prevent Megabus to operate there too…not sure if the “good deal” apply on cross-state or cross province only where regulation couldn’t apply. In France like in Germany or Switzerland, inter-city bus business is heavily regulated but cross-country much less (eurolines is on this market segment).

I was not arguing for complete deregulation. It is clear from the text that I still put passenger safety first. What I am saying is that the type of regulation we have – where schedules and fares are both controlled and the intention is to prevent competition – stops new services like MegaBus from being introduced. They change schedules and fares all the time in response to demand. The regulations BC has do not permit that. What is strange is that these regulations were left in place when the government said that it was determined to deregulate everything. The question Kevin Falcon has to answer is: why was the BC intercity bus business exempted from change?

[…] I prefer to look at it differently though. What Megabus & Co. are proving is that there is a viable market for intercity transit-style travel at the right price. Thus they are helping to get people used to the idea of traveling that way an in a sense priming the pump for high speed rail at a later date as demand increases. The bus operators are doing the hard work of creating and proving out the market for this. Also, Megabus will hopefully force the backers of many of these HSR proposals to rethink their concept around 110MPH peak speeds in favor of true high speed rail. And even in the worst case, Megabus doesn’t say anything against such slam dunk investments as further upgrades to the NEC. Conceivably if and when HSR investments are made, these bus operators will service a different, lower end market and/or evolve into more of a rail complement. (For another perspective on this, see “Will Megabus Kill High Speed Rail?.”) […]

Yes, Megabus/BoltBus do kill high speed rail — and that’s a good thing. The Acela is already hideously expensive. To take the Acela from DC to NYC on Sep 13 and return the next day costs $372 (and remember, Amtrak is subsidized!) with a travel time of roughly 2:45 each way. For BoltBus I can do the same trip for $26 (yes, highways are subsidized too, but this is why we have a gas tax) with a travel time of 4:15 each way. The only people Acela makes sense for are mostly business travelers who place a premium on time and have their companies pick up the tab and the wealthy. For anyone else the time savings of 1.5 hours for an extra $340 is nuts.

Now, for genuine high speed rail between DC and NYC will the cost be more or less than the Acela. No doubt more, given the cost of buying the trains, putting in rail capable of handling the higher speeds and maintaining it all.

Simply put, high speed rail makes little sense. While many people for some reason romanticize the thought of being whisked from city to city in shiny new trains, the economics of it do not add up at all. Buses, meanwhile, are cheap and good for the environment.

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Who am I and what is this

I am a transportation economist and regional planner, displaced from England by the abolition of the Greater London Council and a dislike of Thatcherism. Until March of 2004 I worked for the Greater Vancouver Transportation Authority on wide variety of policy issues. None of these have been solved since I left, and the region has abandoned its long established growth strategy altogether, as the province expanded its major highways and is now proposing another new bridge over the Fraser. I have long advocated more sensible policies to better integrate transport and land use. And this blog is a way to keep up the pressure! It also allows me to vent a bit on related issues.